A unicorn startup, a company with a valuation over $1 billion, is a rare beast. According to a September 2021 report by CB Insights, there are only around 800 in the wild. Any startup needs a killer idea; but to truly achieve unicorn status, a company needs the ability to scale up quickly.
Consumer products startups in particular face tough challenges when driving toward this goal. Many face intense competition from monopolistic giants in their industries with seemingly infinite capital resources.
Do you have what it takes to beat the odds? You’ll need to meet these challenges to achieve scale if you quest for unicorn status.
1. Have an Unbreakable Infrastructure that Can Scale Up Quickly
A consumer products startup needs a scalable digital infrastructure. Too many companies use systems that were cobbled together as a proof of concept and never rationalized.
As a startup grows, its product offerings will become more varied. Order volumes increase, too. Soon there will be an entire international supply chain to manage, which means compliance with regulations in multiple countries. Financial systems will need to be professionally audited.
All of this must be done in a way that still delivers the warmth and personal touch consumers expect from a startup.
Finding the right infrastructure and backend system that can support a startup on this journey is as big a milestone as launching new products or securing funding. The wrong infrastructure will be difficult to scale or change; fixing it wastes time and effort, and productivity will plummet as employees are idled by downtime or forced to retrain on updated systems.
In contrast, the right system will help businesses scale in a way that is simple and non-disruptive. New functions can be rolled out when needed without interrupting existing operations. Startups want systems that have the full suite of features, but that don’t require their use all at once.
2. Collect a Holistic and Integrated Data Set
To manage and grow a consumer product startup, you need visibility into data from all of your departments, from external partners and suppliers, and from customer purchase patterns. Getting this right will deliver the startup a holistic view of data—a single view, all in real-time. Data is the oil of the 21st century, so real-time insight into that data—and the ability to mine and refine it into information—is critical for decision-makers.
Many startups launch using an Excel spreadsheet for accounting. This will become a major problem once the startup has begun to shine and starts its rapid growth. By starting with a proper enterprise resource planning (ERP) platform, the company will have a strong foundation that can support its evolution, rather than a fragmented, complex mess.
Rothy’s, a unicorn shoemaker, made the move to an ERP system early. In just three years, the startup has gone from an idea and a small stall in San Francisco’s Ferry Building to $140 million in annual revenue.
“We wanted to be a completely holistic, integrated company with an excellent customer experience—not just on the sale, not just on the product, but end-to-end,” says Ulion Riebe, Rothy’s head of finance. Riebe sees ERP as the nerve center for the business and a single source of truth for unified operations.
3. Implement End-to-End Automation
Complete business process automation is also an important aspect of scaling a startup. In a company with isolated and fragmented business processes, employees end up having to rework or re-key data into different siloed systems. This wastes time and leads to errors and inconsistencies.
End-to-end automation was important for Rothy, as the company envisioned lean operations and knew that the order volume for a large consumer business would be otherwise unsustainable as the organization grew. Massive hiring would slow down growth and hurt margins; the headcount needed to process the million pairs of shoes the company sold in 2018 —and the two million pairs it estimated for 2019—would be prohibitive.
“We knew from the beginning that we weren't going to have a 50-person packs department, a 50-person billing department, or a 100-person customer service department,” explains Riebe. “We needed to have these systems all talking to each other in real time, with not a whole lot of manual intervention.”
While the ecommerce side was automated, financials largely were not. Sales, returns, discounts and product costs were all just journal entries run through Microsoft Excel.
“We used to have these long processes in accounting where we needed to figure out what we’d sold versus what we'd shipped,” Riebe says. This was another driver that led Rothy to an ERP system that collected and automated all aspects of the company’s operations, generating reports from the data in minutes.
4. Take advantage of industry-specific, cloud-based ERP
A startup with unicorn dreams needs to look at the elastic capabilities of cloud-based ERP, built from modules that can expand along with the company’s growth journey without a huge upfront investment. Many cloud-based ERP solutions offer pay-as-you-go models that charge by number of employees or users, with flexible terms geared for startups.
A typical startup begins life with a few core founders; but when scale hits, it needs to quickly recruit more employees to meet the demands of business success. Traditional on-premise ERP simply cannot meet these needs—not only because of cost, but due to the long lead times and high failure rates associated with rollout.
The journey from idea to a Billion Dollar valuation is hard, even with a good idea. But it is possible. Getting there takes lots of work, however—and the right foundation.